Here's a look at the new rules introduced in Budget 2018 and how much tax you would be able to save this financial year due to them.

This benefit will be available to those individuals as well who pay health insurance premium for their parents aged 60 years and above.

Budget 2018 introduced certain changes in tax laws that allow you to save more tax than you could in previous years.

Here's a look at these new rules and how much tax you would be able to save this financial year due to them.

Increase in tax benefit on health insurance premium paid for parents

One of the announcements in Budget 2018 was raising the maximum amount on health insurance premium paid for senior citizens that can be claimed as a deduction from gross total income before levy of tax. As per the announcement, deduction limit for the health insurance premium paid for senior citizens has been raised to Rs 50,000 from the earlier limit of Rs 30,000.

This will not only benefit those senior citizens who themselves pay the health insurance premium but also those individuals who pay health insurance premium for their parents aged 60 years and above.

Earlier an individual who was paying health insurance premium for his/her spouse, kids and parents, could claim maximum deduction of Rs 55,000 (of premium paid) from gross total income before levy of tax. However, from FY 2018-19 onwards, he/she can claim a maximum deduction of Rs 75,000 under this section.

If both the individual and his/her parents are above 60, then from FY 2018-19 onwards, the maximum deduction available is Rs 1 lakh as compared to the previous limit of Rs 60,000 earlier.

This is how your tax-savings will be impacted if you claim the maximum deduction of Rs 75,000 at different tax slabs.

Tax-savings due to increase in tax benefit under section 80D

Income tax rates

Earlier Tax Savings

Tax savings now

Additional tax savings

5% tax rate

Rs 2, 750

Rs 3, 750

Rs 1,000

20% tax rate

Rs 11,000

Rs 15,000

Rs 4,000

30% tax rate

Rs 16,500

Rs 22,500

Rs 6,000

Savings are exclusive of impact of cess

Abhishek Soni, CEO, tax2win.in, a tax-filing firm says, "If you have incurred medical expenditure on senior citizen parents who is not covered under any health insurance policy, then also you can claim a deduction under this section. You can claim deduction for medical expenses up to Rs 50,000 in this case."

Increased benefit under section 80DDB for senior citizens

Apart from increasing deduction on the health insurance premium paid for senior citizens, Budget 2018 also announced a hike in the deduction amount under section 80DDB. A deduction under section 80DDB is available to all resident individuals and HUFs for the expenditure on himself/herself or on dependants incurred due to specified illnesses.

Some of the specified diseases are chronic renal failure, full blown Acquired Immuno-Deficiency Syndrome (AIDS), Hematological disorders (Hemophilia, Thalassaemia) and so on. To know the full list of specified diseases, you can refer to Rule-11DD under Income Tax Rules.

As per the amendments, expenditure incurred on treatment of specified diseases by senior citizens themselves or by any resident individual for the treatment of the senior citizen, then the deduction available will be up to Rs 1 lakh. Therefore, if you have incurred expenses on the treatment of a dependant who is a senior citizen for the diseases specified, then you are eligible to claim this deduction. Dependant is defined as spouse, children, parents, brother and sisters of the individual.

Till FY 2017-18, for senior citizens aged between 60 years and 80 years, a maximum deduction of Rs 60,000 was allowed. For very senior citizens (aged 80 years and above), the maximum deduction allowed was Rs 80,000.

If you are eligible to claim this deduction, this is the amount of tax you are likely to save:

In case of senior citizens aged between 60 years and 80 years

Income tax rates

Earlier tax savings

Tax savings now

Additional tax savings

5% tax rate

Rs 3,000

Rs 5,000

Rs 2,000

20% tax rate

Rs 12,000

Rs 20,000

Rs 8,000

30% tax rate

Rs 18,000

Rs 30,000

Rs 12,000

Savings are exclusive of impact of cess

In case of very senior citizens aged 80 years and above

Income tax rates

Earlier Tax Savings

Tax savings now

Additional tax savings

5% tax rate

Rs 4,000

Rs 5,000

Rs 1,000

20% tax rate

Rs 16,000

Rs 20,000

Rs 4,000

30% tax rate

Rs 24,000

Rs 30,000

Rs 6,000

Savings are exclusive of impact of cess

However, for expenditure incurred for individuals below the age of 60, the maximum deduction has been capped at Rs 40,000.

Re-introduction of standard deduction

Another major announcement for salaried individuals was the re-introduction of standard deduction. The deduction of Rs 40,000 has been reintroduced in the lieu of medial reimbursement of Rs 15,000 and transport allowance of Rs 19,200 annually.

For someone in the highest tax bracket, the combined amount of medical reimbursement and transport allowance would have led to a saving of Rs 10,260. However, standard deduction of Rs 40,000 introduced with effect from FY 2018-19 will help you save a maximum of Rs 12,000, translating into an additional saving of Rs 1,740. However, it needs to be mentioned that there is an increase in cess from 3 percent in FY2017-18 to 4 percent for FY2018-19. This cess would lead to an increase in tax payable on the final amount of taxable income (after accounting for tax saving deductions).

Tax-savings due to standard deduction at different slab tax rates

Income tax rates

Earlier Tax Savings

Tax savings now

Additional tax savings

5% tax rate

Rs 1,710

Rs 2000

Rs 290

20% tax rate

Rs 6,840

Rs 8000

Rs 1,160

30% tax rate

Rs 10,260

Rs 12000

Rs 1,740

Savings are exclusive of impact of cess

Also, remember the standard deduction can be claimed at the time of filing income tax returns and only from the income under the head salary.

Exemption on interest income up to Rs 50,000 for senior citizens

For senior citizens, Budget 2018 brought a lot of cheer. In the budget, the finance minister, hiked the exemption limit on interest income for senior citizens and also increased the ambit of interest incomes that were covered. From FY 2018-19, senior citizens can claim a deduction up to Rs 50,000 from the total interest income earned from specified sources. This deduction can be claimed under the newly introduced section 80TTB.

Earlier, senior citizens could claim deduction up to Rs 10,000 on the interest earned on the savings account held with a bank or post office under section 80TTA.

Here's the amount of tax senior citizens will save by using this deduction fully:

Income tax rates

Earlier tax savings under section 80TTA

Tax savings now under section 80TTB

Additional tax savings

5% tax rate

Rs 500

Rs 2,500

Rs 2,000

20% tax rate

Rs 2,000

Rs 10,000

Rs 8,000

30% tax rate

Rs 3,000

Rs 15,000

Rs 12,000

Savings are exclusive of impact of cess

The interest income which is eligible for deduction should be from the deposits held with banks or post office. Therefore, interest income earned from savings accounts, fixed deposits, recurring deposits or small savings schemes such as Senior Citizens Savings Scheme, Post Office Monthly Income Scheme and so on offered by post office are eligible for this deduction subject to a limit of Rs 50,000 in a single financial year.

Watch outsBudget 2018 not only introduced various tax saving proposals but also hiked the cess by 1 percent, i.e., from 3 percent to 4 percent. The cess will be levied on your final tax liability after claiming all the deductions that you are eligible for.